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Shipping Corp axes two more orders to build ships

LiveMint logoLiveMint 21-05-2014 P.Manoj

Bangalore: Shipping Corp. of India Ltd (SCI) has cancelled orders for building two ships since April to add to the seven it had scrapped in the year ended March, as India’s biggest ship owner struggles with losses in a weak freight market.

“We have cancelled one container ship ordered at STX (Dalian) Shipbuilding Co. Ltd, China, and one anchor handling, towing and supply vessel (AHTSV) ordered at ABG Shipyard Ltd,” a spokesman for the Mumbai-based company said.

AHTSVs are used to support offshore oil-drilling operations. The container ship was designed to load 6,500 standard containers.

The orders were cancelled due to delays by the shipyard in constructing and delivering the vessels, the spokesman added.

SCI now has five new ships on order, including two oil supertankers, two offshore support vessels and one container ship. Of this, one more container ship of 6,500 container capacity ordered at STX (Dalian) Shipbuilding may be cancelled, the spokesman said.

SCI will get refunds from the cancelled shipbuilding contracts.

“Some money has come (from the cancelled ship orders) and for others we are fighting. Yards and banks adopt delaying tactics in refunding. The realization of this money is of great help in the prevailing challenging circumstances,” chairman and managing director Arun Kumar Gupta said in an April interview.

In the nine months ended 31 December, SCI posted a loss of `287.90 crore. The company will announce financial results for 2013-14 on 27 May. The firm had reported losses in the two preceding financial years as well.

SCI is taking steps towards alternate deployment of the funds received from the cancelled ship orders, the spokesman said. The firm runs a fleet of 73 ships.

The company is also looking at selling its 49% stake in the Irano Hind Shipping Co. to joint venture partner Islamic Republic of Iran Shipping Lines (IRISL), Gupta said.

In April 2013, the cabinet agreed to wind down the joint venture (JV) company as Western sanctions against Iran’s disputed nuclear programme hurt its operations.

The move follows differences between the partners on dissolving the company and splitting the assets, mainly six ships comprising two crude oil tankers and four bulk carriers.

“The Islamic Republic of Iran Shipping Lines said that splitting the assets was not possible under Iranian laws,” Gupta said. “So, we are now looking at selling our 49% stake to IRISL and exiting the JV company.”

The Irano Hind Shipping Co. was formed in March 1975 on the basis of a bilateral agreement between India and Iran.

SCI will soon close the deal to sell its 50% stake in the chemical carrier joint venture with Shapoorji Pallonji Group. The board of SCI had decided last year to exit the JV company by selling its stake to the other partners after continuous losses eroded the net worth of the company.

Shapoorji Pallonji Group companies Forbes and Co. Ltd and Sterling Investment Corp. Pvt. Ltd own 25% each in India’s lone chemical tanker operating firm which started business in 2009 with four new chemical tankers, each having a capacity to carry 13,000 tonnes of cargo.

“The deal will be closed in the next few days,” Gupta said.

Shipping analysts say SCI may not make any money from the deal.

“The chemical carrier market is going through a rough patch. If at all SCI gets money from the stake sale, it will only be peanuts,” said a Mumbai-based shipping industry executive who declined to be named.

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